Asia

Japan Airlines Corp.'s stint under bankruptcy protection isn't likely to be short or simple, The Wall Street Journal reported. The carrier, known as JAL, faces massive liabilities and has a sprawling business that covers everything from jet-fuel procurement to aircraft leasing, both in Japan and overseas. The case could also raise challenging questions about whether bankruptcy protection will be recognized as it does business in other countries. JAL said Tuesday it expects its international operations to continue as normal, though some detail may need to be sorted out.
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The two core units of Japan Airlines Corp in charge of operating flights and procuring funds will file for bankruptcy protection along their parent, the Nikkei newspaper reported on Friday. Japan Airlines Corp, Asia's largest airline by revenues, will file for bankruptcy protection as early as Tuesday as part of a restructuring package being crafted by a state-backed turnaround fund, sources have told Reuters.
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Japan Airlines moved a step closer to bankruptcy Friday by drawing down $1.6 billion in emergency funding, and the nation’s transport minister said the government would decide Tuesday on a state-led restructuring plan for the troubled carrier, The New York Times reported. JAL, the largest airline in Asia by revenue, has seen its market value collapse as probability has increased that it will file for bankruptcy protection. “We are doing everything possible to reduce anxiety,” said Seiji Maehara, the transport minister.
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The ongoing restructuring of Japan Airlines has landed legal advisory roles for Steptoe & Johnson, Hogan & Hartson, Jones Day, and two of Japan’s leading law firms, The AmLaw Daily reported. Eiji Katayama, a name partner at Japanese firm Abe, Ikubo & Katayama in Tokyo, is advising ETIC on JAL’s restructuring efforts. Under Japanese bankruptcy law, Katayama will likely be appointed trustee for JAL, where he would perform most of the duties traditionally reserved for debtors’ counsel in the U.S.
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A Japan Airlines Corp bankruptcy will have a wide-spread impact on small businesses that account for half of the nearly 3,000 Japanese companies that do business directly with the carrier, a research firm said. Tokyo Shoko Research said small firms with less than 1 billion yen ($10 million) in sales make up half of JAL's major business partners, supplying goods to or buying from JAL's 91 group firms. "It's highly likely these small companies will feel the pinch because they depend heavily on business with JAL," said Kazufumi Masuda, a researcher at Tokyo Shoko, which tracks bankruptcy data.
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China's pullback from stimulus efforts, which were geared toward grappling with the financial distress, is likely to affect Korea in deciding when to employ its own exit strategy, The Korea Times reported. China, Korea's largest trading partner, began to withdraw its expansionary policies this week with its central bank raising lenders' reserve requirement ratio by 50 basis points.
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Germany's Blue Wings is looking for funds following a dispute with shareholder Alexander Lebedev, as financial problems led regulators to ban the Duesseldorf-based airline from flying, Reuters reported. The carrier halted flights earlier on Wednesday, mere hours before German aviation authorities revoked its operating license for the time being, according to a spokesman for the company. Blue Wings' financial woes, which have left its staff without pay since mid-November, stem from a lack of financing from shareholders, the spokesman said.
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The government has effectively gotten Japan Airlines Corp.'s main creditor banks to agree to let JAL file for bankruptcy under the Corporate Rehabilitation Law, and the carrier may do so Tuesday. It remains unclear, however, how Japan's biggest airline can be resurrected under court-led restructuring. In a Q&A, The Japan Times reported on questions and answers regarding the Corporate Rehabilitation Law and how it may be applied to JAL. Read more.
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Shares in Japan Airlines plummeted 81% today to just ¥7 amid strong indications that the firm will file for bankruptcy and have its shares delisted as early as next week, The Guardian reported. Asia's biggest airline is expected to submit itself to a government-led rehabilitation package that will include a complete reduction of its capital. Investors, whose shares were each worth ¥213 at the beginning of last year, will see the value of their investment wiped out.
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China backed off its giant stimulus effort Tuesday by reducing the amount of cash banks have available to lend, in the clearest signal yet that the government is worried that the nation's credit binge now risks igniting inflation, The Wall Street Journal reported. China's stimulus program, led by a government order to banks in late 2008 to flood the economy with cash, helped to carry China through global financial turmoil. The economy is now poised to surge past Japan this year as the world's second-largest economy after the U.S.
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